Bitcoin: Part I: An Introduction

What do Bitcoin and Chuck E. Cheese’s have in common?  A lot, Bitcoin and Chuck E. Cheese’s have a lot in common.  A lot more in common than not, and much more than you might realize.  There is one very substantial difference we will address but, for now, another year, another record close for Bitcoin, and record closes for real estate, stock markets, collectible art and vintage automobiles, around the world, for that matter.  There has been a lot written about Bitcoin and what the future might hold for this “digital currency”.  Many had hopes that Bitcoin might be the future of “money”; replacing currencies such as the US dollar, Japanese Yen, and Euro.  Others, more recently, are far less interested in Bitcoin as money, for daily transactions, opting instead to focus on the value of Bitcoin as an “investment”.

In several parts, I will address Bitcoin as money and investment, but believe what is far more impactful regarding the phenomenon of Bitcoin, is the decentralized market-based technology behind the “coin” itself, and what the short and long-term implications are for the current regime of political-based centralization of money, and finance, in general.  We will look well beyond the world of Bitcoin to a future with many options in which to hold “money”, store value, and transact business.  I want to make it clear up front, and will allude to this throughout, that Bitcoin represents, to me, not necessarily an ideal medium of exchange, nor is it an investment.  For non-insiders, non “miners”, those not intimately involved in the Bitcoin industry with ample interest in promoting their product regardless of its merits, the Bitcoin “opportunity” represents pure speculation.

Will someone pay more for my Bitcoin than I have?  That is the question.  Despite my misgivings regarding any reasonable basis for widespread adoption and a questionable risk/reward profile, however, Bitcoin represents possibly the most significant threat to politically controlled, State-monopolized, production of base money and cartelized banking in well over 200 years.  In fact, I believe, at least in the United States, that we would have to go back to the 18th century, pre-Revolution, to find a potentially better opportunity for private money alternatives and a naturally evolving banking industry.  Bitcoin, or at least the technology and innovations behind it, are akin to applications like Uber and Airbnb.  When considering society as a whole, however, the impact of Uber and Airbnb are inconsequential compared to Bitcoin, and its potential impact on central bank hegemony over money .

To understand the extent of retardation within money and banking, we must consider the technological advancements and innovations that have occurred throughout the world in industry after industry, since the 17th century.  Established by Dutch-Latvian Johan Palmstruch in 1668, Sveriges Riksbank (the Bank of Sweden) is often considered by many as the world’s oldest central bank, a producer of monopoly money and head of a cartelized banking system.  To this day, the confluence of State, money, and banking, as represented in the founding of the Bank of Sweden, has served as a model and inspiration for all other central banks, including the Federal Reserve in the United States and, with the exception of advancements in other industries, like electricity and the microchip, which have acted to give money and banking a more modern “feel”, the production of money and credit through the banking sector has not fundamentally changed in 350 years.

Consider how many industries and products exist now, that did not exist in 1668.  Further, consider the implications of zero enhancements, in fact a diminution in the quantity and quality of products available now, compared to 1668.  Here it is; if every industry was subjected to the same impediments in technological advancements and innovations as in the production and distribution of money and credit, the quality of what would be a vastly limited number of products available to us today, from every other industry, would be of lesser quality, and available at a higher real price than existed in 1668.  The world population would be the same, or less, now, compared to 1668.  There is simply no way to underestimate the negative impact of tight centralization and control, by the State, of money, banking, and exchange media in general.  It is only due to relative liberties and natural progression in other industries, that the economy does not implode in short order.

These days, all vehicle manufacturers utilize aluminum, plastic, carbon fiber, advanced electronics, and many other innovations far to great in number to list here.  These alternatives combine strength, corrosion resistance, speed, safety, comfort, durability, etc., that far surpass the technology available in vehicles 100 years ago, let alone available in forms of transportation being used in 1668, like the stagecoach.  A heavy and cumbersome carriage, often without any form of springs for shock absorption, and pulled by horses, the stagecoach was introduced in Britain in 1640.  Now, if we draw a parallel between money and transportation, and, specifically, central banking and the stagecoach, we can begin to get some idea of where we currently stand today in terms of money, credit, and, again, exchange media, in general.

Advances in transportation, compared to money and banking, can be traced to one  primary cause, competition.  Imperfect at that, it has only been through competition that mankind’s natural and innate ability to innovate has been able to flourish.  We don’t have one monopoly automaker headquartered in Washington, D.C., and we sure don’t need one for money either.  In only a few short years, subjecting the production of money and credit to a more spontaneous and natural order, with access to technology we possess right now, would permit us to catch up to advances in every other area of our lives.  It would be kind of like trading in your 1668 stagecoach for a 2018 Ferrari.

This is the end of Bitcoin: Part I: An Introduction.  Up next, Bitcoin: Part II: What is Bitcoin?  In Part II, amongst other topics, we will answer the question; what do Bitcoin and Chuck E. Cheese’s have in common?

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